The Franchise Freedom Act: What Buyers Need to Know About the Push for Private Lawsuits

There is a bill working its way through Congress that would fundamentally change what happens when a franchisor violates the FTC Franchise Rule. Right now, if a franchisor fails to disclose required information, the FTC can pursue enforcement. But individual franchisees cannot sue under the Rule itself.

The Franchise Freedom Act would change that.

What the Law Currently Allows

The FTC Franchise Rule is a disclosure regulation. It tells franchisors what they must reveal to buyers before a sale. But it does not give individual franchisees a private right of action. If a franchisor lies in their FDD or omits required information, your only federal recourse is to hope the FTC decides to investigate.

Some states have their own franchise relationship laws that provide additional protections. But the federal framework, which applies everywhere, has no mechanism for an individual buyer to enforce it directly.

What the Franchise Freedom Act Would Change

The bill (originally introduced as H.R. 10311) would create a private right of action for disclosure violations. In practice, this means a franchisee who discovers that their franchisor failed to comply with the FTC Franchise Rule could bring a lawsuit on their own, without waiting for federal enforcement.

The proposed remedies go beyond refunding the franchise fee. The bill includes provisions for "additional equitable relief," which could cover lease obligations, loan costs, and other expenses a buyer incurred because of the misleading disclosure.

That distinction matters. A franchise fee might be $40,000. But the total investment, including buildout, inventory, and lease commitments, can easily exceed $300,000. Under current law, recovering those downstream costs through a federal franchise rule claim is not possible.

Why This Matters Right Now

Whether or not this bill passes (and many industry observers are skeptical under the current administration), the conversation itself tells you something important about the state of franchising.

The fact that legislators keep introducing private right of action bills means there is a persistent gap between what the disclosure system promises and what buyers actually experience. That gap is the reason due diligence matters more than the law itself.

Do not buy a franchise expecting to be protected by regulation. The Franchise Rule is a disclosure tool, not a guarantee. Read the document. Verify the claims. Talk to existing franchisees listed in Item 20. Run the numbers yourself.

What You Should Do Today

If you are evaluating a franchise, treat the FDD as a starting point, not a safety net. The regulatory environment is evolving, but it has not caught up to the complexity of modern franchise transactions. Your protection comes from reading the document, understanding what each Item means, and asking the questions the FDD is designed to surface.

Source: H.R. 10311, 118th Congress (reintroduced 119th Congress). AAFD 2025 Franchise Legislative Activity Update. FTC Franchise Rule, 16 CFR Part 436.